Fitch Report: EEI 2008 Wrap-Up: Cost of Capital Rising

2008-11-18 00:24:01 -

Today Fitch Ratings issued a special report summarizing themes that emerged from the assembly of investor-owned electric utilities, power generators, and investors in the global power sector at the 43rd Edison Electric Institute Financial Conference, which convened Nov. 9-12, 2008. According to the report, although the electric utility group is less sensitive to recessionary factors than many other parts of the U.S. economy, nonetheless, companies are still subject to funding pressures relating to the ongoing credit and equity market dislocations.
Aside from uncertainties about the availability of funding to support the industry's large capital expenditure budgets, conference participants also speculated about the potential policy directions of a new Obama administration and Democratic majority in the U.S. Congress in such areas as taxes and dividends, energy conservation and renewables, coal and nuclear power.
"Utilities too, feel the burden of the credit crisis, but Fitch believes the power and gas sector, having prudently managed its finances, is well positioned to face a challenging future; consequently, we do not currently envision wholesale changes in ratings," said Glen Grabelsky, Managing Director at Fitch Ratings. He added, "If funding conditions remain very constrained throughout 2009, then there could be more adverse credit implications for companies in the sector with major debt maturities or large non-discretionary capital expenditure commitments."
The report highlights five key themes that appeared repeatedly in management presentations at this conference:
-- Weakening trends in unit sales of electricity;
-- Increased focus on companies' liquidity and capital market access;
-- Higher cost of capital;
-- Regulatory lag affecting the ability to recover higher cost of capital;
-- Initiatives to reduce discretionary capital spending and external financing needs.
Fitch's Utilities, Power and Gas team hosted its 20th annual Global Power Breakfast at the EEI Financial Conference on Nov. 14, 2008. Slides from the presentation including a transcript of the speeches given have been posted to Fitch's website.
Please visit Fitch's web site, cts.businesswire.com/ct/CT"id=smartlink&url=http%3A%2F%2Fwww .. for the full report 'EEI 2008 Wrap-Up: Cost of Capital Rising', as well as Fitch's presentation and transcript '20th Annual Global Power Breakfast: Investing in an Unpredictable World'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, cts.businesswire.com/ct/CT"id=smartlink&url=http%3A%2F%2Fwww ... Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.


Fitch Ratings, New York

Ellen Lapson, CFA, +1-212-908-0505

Glen Grabelsky, +1-212-908-0577

Media Relations

Cindy Stoller, +1-212-908-0526

mailto:cindy.stoller@fitchratings.com